2012 (6) TMI 185 - HC - Income Tax

Levy of interest on non deduction of TDS - payment of Tax by the deductee - Circular No 8/2009 issued by the Board on 24 November, 2009 - held that - The grievance is in respect of the said Circular instead of calculating the interest till the date of payment of the tax by the deductees, the interest is calculated up-to-the due date of filling of return. In fact this Court had an occasion to consider this question in the case of SOLAR AUTOMOBILES INDIA (P) LTD., Vs DEPUTY COMMISSIONER OF INCOME TAX 2011 (9) TMI 637 (HC) - payment of interest under the Act is compensatory in nature. - The authorities shall re-do the exercise of calculating the interest and thereafter issue a fresh demand if they choose to recover the same.

Summary

Issues Involved:
1. Challenge to order passed by assessing authority under Income Tax Act, 1961.
2. Validity of Circular No 8/2009 issued by the Board regarding Section 194(i) applicability.
3. Calculation of interest as per Circular and legal implications.

Analysis:

Issue 1: Challenge to order passed by assessing authority under Income Tax Act, 1961
The appellants challenged the order passed by the assessing authority under the Income Tax Act. The High Court noted that statutory appeal and second appeal options were available against such orders. The Single Judge entertained the Writ Petitions and held that Section 194J was applicable. The High Court found that the Single Judge should not have entertained the Writ Petitions when alternative remedies were available. The High Court set aside the Single Judge's order, allowing the appellants to prefer a statutory appeal and present all grounds before the appellate authority.

Issue 2: Validity of Circular No 8/2009 issued by the Board regarding Section 194(i) applicability
The appellants challenged Circular No 8/2009 issued by the Board regarding the applicability of provisions under Section 194(i) of the Income Tax Act. The High Court declined to address the validity of the Circular, stating that the appellate authority should decide the appeals in accordance with the law. The High Court mentioned that if orders go against the assessees, they could challenge both the order and the Circular.

Issue 3: Calculation of interest as per Circular and legal implications
Regarding the calculation of interest as per Circular, a grievance was raised that interest was calculated up to the due date of filing the return instead of the date of payment of tax by the deductees. The High Court referred to a previous case and highlighted that interest payment under the Act is compensatory in nature. The authorities were directed to re-calculate the interest and issue a fresh demand if necessary, meeting the ends of justice. The Writ Petitions and Writ Appeals were disposed of with parties bearing their own costs.

In conclusion, the High Court emphasized the availability of statutory appeal remedies, the authority's role in deciding appeals, and the compensatory nature of interest payment under the Act.